Correlation Between Gear4music (Holdings) and Revolution Beauty

Can any of the company-specific risk be diversified away by investing in both Gear4music (Holdings) and Revolution Beauty at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Gear4music (Holdings) and Revolution Beauty into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gear4music Plc and Revolution Beauty Group, you can compare the effects of market volatilities on Gear4music (Holdings) and Revolution Beauty and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Gear4music (Holdings) with a short position of Revolution Beauty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gear4music (Holdings) and Revolution Beauty.

Diversification Opportunities for Gear4music (Holdings) and Revolution Beauty

0.43

Correlation Coefficient

Gear4music (Holdings)  Revolution Beauty

Very weak diversification

The 3 months correlation between Gear4music and Revolution is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Gear4music Plc and Revolution Beauty Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Revolution Beauty and Gear4music (Holdings) is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Gear4music Plc are associated (or correlated) with Revolution Beauty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Revolution Beauty has no effect on the direction of Gear4music (Holdings) i.e., Gear4music (Holdings) and Revolution Beauty go up and down completely randomly.

Pair Corralation between Gear4music (Holdings) and Revolution Beauty

Assuming the 90 days trading horizon Gear4music Plc is expected to under-perform the Revolution Beauty. But the stock apears to be less risky and, when comparing its historical volatility, Gear4music Plc is 4.95 times less risky than Revolution Beauty. The stock trades about -0.25 of its potential returns per unit of risk. The Revolution Beauty Group is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,450  in Revolution Beauty Group on December 26, 2024 and sell it today you would lose (104.00) from holding Revolution Beauty Group or give up 7.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Gear4music Plc  vs.  Revolution Beauty Group

Gear4music (Holdings)

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gear4music Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Revolution Beauty

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Revolution Beauty Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Revolution Beauty may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Gear4music (Holdings) and Revolution Beauty

The main advantage of trading using opposite Gear4music (Holdings) and Revolution Beauty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gear4music (Holdings) position performs unexpectedly, Revolution Beauty can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Revolution Beauty will offset losses from the drop in Revolution Beauty's long position.

The idea behind Gear4music Plc and Revolution Beauty Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.